Charles Stevens, Corporate VP, Enterprise Storage Division, Microsoft Corp.

"The biggest growth in the market is in file server consolidation."

January 26, 2004

15 Min Read
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As corporate VP of the Enterprise Storage Division at Microsoft Corp. (Nasdaq: MSFT), Charles Stevens is at the forefront of the company's foray into storage networking.

He's got an interesting gig. Few companies have the market influence of Microsoft, so the company's momentum in any area related to server and desktop computing can't be ignored. And the company's riding a storage high.

Microsoft's competing directly for NAS dollars with Network Appliance Inc. (Nasdaq: NTAP). It's gotten into security integration with the big Fibre Channel suppliers. And by certifying a slew of iSCSI hardware vendors for Windows compatibility late in 2003, Microsoft upped the ante for the low-end storage market. (See Sands Shift Under NAS Market, Microsoft VP Sounds Off on SAN Security, Microsoft Blesses iSCSI Hardware.)

Key to it all is Microsoft's plan to use its server software to leverage its way further into the low-end storage market, where a growing roster of companies is consolidating file and print servers and beefing them up with common storage facilities on IP networks.

The strategy has taken awhile to unfold. Folk perked up when the Redmond Sasquatch made known its storage ambitions two years ago by founding the division for which Stevens now runs sales, marketing, and product management. But few expected much for awhile, anyway. After all, the market was struggling, and SANs were still more or less a non-issue at the level of small-to-medium-sized businesses and departments. To the outside world, the project seemed little more than a prospecting assignment for Stevens's boss, senior exec Bob Muglia (see Microsoft's Stealth Storage Play).But times have changed, and it now looks as if Microsoft's preparation was worth it. Now, in an improved economy, the company stands ready to tap synergies among its server software, DAS and NAS replacement, and emerging iSCSI.

The strategy's still in flux. Several weeks back, management made Muglia senior VP of the Windows Server Division, of which Enterprise Storage is now a part. Muglia in turn answers to Eric Rudder, senior VP of Servers and Tools, one of Microsoft's seven core business units. Exactly what impact this move will have on Stevens's title and the storage division in general is still playing out.

Stevens is caught up in all this activity – enthusiastically so. A 20-year Microsoft veteran, he's held a range of jobs that involve all of the elements that go into the company's storage networking strategy – ISV relationships, enterprise customers, and global marketing. He was, for instance, VP of the Microsoft Enterprise and Partner Group, and for three years in the late 1990s he was VP of Microsoft's Asia business.

We caught up with Stevens on the phone in mid-January. In true Microsoft mode, he's quite a talker and was eager to evangelize, but ready to clarify when we confronted him with questions about HP,IBM, Linux, security, and other topics.

Click on the links below for specific portions of the interview:

— Mary Jander, Site Editor, Byte and Switch

Byte and Switch: Can you describe Microsoft's storage strategy?

Stevens: Well, the Enterprise Storage Division was established in January 2002, headed up by Bob Muglia. It's two years old and part of the Servers and Tools Division... Now Bob heads up the Windows Server Division, which includes servers, storage, and management. I report to Bob; Bob reports to Eric Rudder.

Byte and Switch: What are the key products in Microsoft's storage strategy? How did they evolve?

Stevens: Originally we had Windows NT, and there were several versions, and that was replaced by Windows 2000 in February of 2000... The code base from NT and 2000 became XP and part of Windows Server 2003. After that came out in April 2003, we released Windows Storage Server 2003 in June.[Ed. note: Windows Storage Server superseded another product called Windows Powered Network Attached Storage. See Microsoft Intros Win Storage Server 2003 and Microsoft Powers Up NAS Play.]

Byte and Switch: So how is Storage Server different from Windows Server?

Stevens: Basically, we're focused on file and print services, not database services. Windows Storage Server 2003 is optimized for file and print... You'd have to purchase the Windows Server separately to obtain database services. Windows Storage Server comes in several versions, with Standard and Enterprise the main versions. It supports clustering, Fibre Channel, and can act as a gateway into a SAN. All versions are offered by OEMs.

Byte and Switch: How many OEMs do you have? What do they do with the software?

Stevens: Thirty-seven to forty. They optimize it. Customers want a preconfigured, optimized Windows Server platform just for storage, and they've got it.[Ed. note: Companies reselling Mirosoft Windows Server 2003 include Dell Computer Corp. (Nasdaq: DELL), EMC Corp. (NYSE: EMC), Hewlett-Packard Co. (NYSE: HPQ), and IBM Corp. (NYSE: IBM), among others.]

Byte and Switch: How's the product doing in the market?

Stevens: It's grown very nicely, grown in market share... The latest numbers were 40 percent of market share in the NAS space.

[Ed. note: Recent research confirms Stevens's observations. In June 2003, IDC reported that Microsoft had 41 percent NAS market share, according to the number of units shipped. And a November 2003 report from Byte and Switch Insider says Microsoft's momentum is expected to continue at the low end of the NAS market.]

Byte and Switch: Who are your leading partners? What about Sun Microsystems Inc. (Nasdaq: SUNW) and IBM?Stevens: Sun is not working with us at all. In the U.S., our biggest partners are HP, Dell, EMC, and a bunch of others. IBM is a vendor of Windows Storage Server but not a big partner. We started with Dell, which has built $1.5 billion in sales with EMC and with us. HP was bent on a Unix, Linux strategy, but after the merger with Compaq, HP created a unified storage division with Windows across the whole line. They have good software for Exchange and SQL Server, the broadest product line of anyone using our software. EMC is a new partner. They needed to have a competitive offering in Windows. They plan to keep investing. We also have NEC in Japan and

Siemens and other partners in Europe.

NEXT: Scoping the Market

Byte and Switch: So is Microsoft chiefly focused on NAS? What's the overall approach to storage networking?

Stevens: In storage, you've got the SAN marketplace – and we're working with most of the major players there – and the NAS space, and the server space. We want to deepen Windows as a storage platform. To do that we have to connect with SANs. And we want to grow our place in NAS and make sure Windows Server itself is a very good storage platform, a much better citizen in the SAN.

In NAS, there are several segments. Over 25,000 systems is the high end. The main players there are EMC and NetApp, and now Windows-based products from HP and others. Then you have the midrange, from 5,000 to 25,000 systems – that's where Windows Storage Server is very strong. Under 5,000 systems, we see as SMB and servers networked for a dedicated environment. Here we see Dell, HP, Sony, Gateway, Iomega, EMC, NetApp...We've grown a lot, I think, because there's lots of different offerings from OEMs... We help consolidate Windows, but we also consolidate servers under Novell [Netware] and Unix. Customers save a lot of money on hardware and storage management – that's our value proposition on the low end and midrange.

There's a huge installed base of dedicated servers that just run file and print. A Windows Storage Server-based product that consolidates those functions is a very good value proposition. There are a lot of old Novell file servers and NT file servers and even Unix that we will get consolidated over the next couple of years.

At the high end [of the NAS market], it's all about integration with SANs, clustering, etc. Through the likes of EMC, HP, and Dell we have a compelling offering against NetApp.

Byte and Switch: What are Microsoft's priorities in the storage networking market?

Stevens: In the next year, we are going to do a lot of things in Windows storage, almost anything in Windows Server file and print will be integrated. We have to push up more into the high end and more into the low end. In the high end, we have to keep supporting more nodes and clusters and better integration. On the low end, it's all about price and convenience.Byte and Switch: Are enterprise customers spending more? How do you see that situation?

Stevens: It varies. Customers are challenged by the fact that there's massive growth in data and having to protect data and do compliance regulation. You have an explosion of email and data, and that's going to continue for ten years. The cost of managing this data is much higher than it was previously, sometimes six times the hardware, software, and people cost.

We're looking at what role we can play to reduce costs, and there are several ways. In the area of hardware, we believe a lot of new serial ATA and nearline storage will come into play. Tape is not going to go away, but in most cases, it will be replaced by fast, low-cost disk storage.

These disk developments will change the whole paradigm of storage, will dramatically bring down the cost of arrays – and we think we can bring storage management costs down, too, with better software, better management integration. That will bring down the cost of managing data.

Byte and Switch: Are customers going to spend more on storage?Stevens: Customers will be paying the same every year but getting more value. There are two massive forces pushing in opposite directions: the explosion of data versus the cost of managing.

NEXT: Low-End Energy

Byte and Switch: So where do you see the biggest growth in the storage market?

Stevens: The biggest growth is in file server consolidation and in branch consolidation of servers for applications such as sales, stock brokerages, insurance agents, proprietary servers... There's also opportunity in SAN integration, if SANs come down into the midmarket. New technologies like iSCSI are helping... It's all about making storage much more economical.

Byte and Switch: So the biggest storage networking market's at the low end?Stevens: Low and medium range and branch... There's a need for consolidation. A lot of server systems are falling out of lifecycle support, and that creates the opportunity to consolidate. That trend will accelerate. NAS is probably the best platform, but it will also happen on SANs. But SANs won't keep up with growth unless they come down in the midmarket and get easier to manage and more secure. Until we can get over that hurdle there won't be much growth.

Byte and Switch: What else is driving the low-end market?

Stevens: ISCSI will help. Everything is overshadowed by new fast disk technology. That will be the biggest driver – replacing tape with pooled, sealed arrays that are very cheap. That's the biggest revolution. One reason we got into the storage business was we wanted to make Windows a better platform, and another was that we saw an inflection point in disk technology that would bring a new metaphor to backup – very fast local disks for very fast recovery. Tape will continue to be used, but in highly specialized environments.

Looking ahead, we envision pools of storage and blades with fast recovery and cheap, long-term storage. That's what will clearly be happening within the next few years.

Byte and Switch: Does Microsoft support serial ATA today in the Windows Storage Server?Stevens: Third parties like Dell and HP will support it, as it affects their business. Windows Server does support serial ATA through a third-party driver, a generic driver. We're definitely committed to doing it in Windows Storage Server but haven't announced the timeframe. But with a desktop or server you can get serial ATA today.

Byte and Switch: What about the home market?

Stevens: Well, in many instances today, homes have more than one computer and are being networked. So in the very small business and home server environment, there's a lot of value to Windows clients in making it easy to protect files and having a one-button kind of deal to back up directory and files. Right now, Iomega and many companies are looking at this. Something is needed that will be very low cost and very expandable, like TiVo for home businesses or small businesses – that kind of ease of use, simplicity, and low cost.

Byte and Switch: What about Linux? Isn't that being talked about for network consolidation too? [See SAN Vendors Scope Linux.] What's your differentiator from Linux?

Stevens: Linux definitely is a competitive offering in this space... Our value proposition against Linux and various proprietary environments is that all the storage functionality has to be bought separately or you have to build it yourself. With Windows Server and Windows Storage Server Enterprise Edition you get the best ISV support, and it works better on your platform than Linux.We have much richer integration. It doesn't matter what you've got to integrate with in the customer environment – mainframes, SANs, most of the different operating platforms. You can consolidate Windows and Unix, NFS and Appletalk, and connect any kind of SAN. This is all about making storage ubiquitous in enterprise environments so people don't have to worry about the cost of managing these things.

We ease integration and ISV support. That's why our market share has gone from 20 to 50 now and Linux hasn't gained share in the file and print space. Linux is not successful in file and print, and it's not successful in storage.

Of course, we can't take that for granted.

Byte and Switch: Does Microsoft support Linux in Storage Server? Can I use Storage Server to consolidate Linux servers, too?

Stevens: We have strong NFS support now, and we can consolidate data from Linux servers. Yes, we want to replace Linux, but we are realistic and know customers will continue to run it. Same with Netware – that is by far the biggest installed base.File and print customers care about never losing data. These aren't huge applications, but they have to work. Customers tell us, 'If I can go a whole year without touching that file and print server, that's what I want.' That's the kind of thing we're after.

Byte and Switch: What about InfiniBand?

Stevens: We don't see the industry attention as for iSCSI. It may turn around, but we're not huge believers in it, long term. We'll keep following it.

NEXT: The SAN Situation

Byte and Switch: What about SANs?Stevens: In SAN we have a good story today, with Storage Server integration. SANs are going to come down in price and need to be easier to deploy and manage. We're working with some suppliers like QLogic to integrate SANs better in high-end environments.

Byte and Switch: What's the biggest challenge with SANs?

Stevens: SANs are not secure. You can get a password and get on... I haven't heard of any real high-profile disasters related to SAN security, but it only takes one. Protecting security and identity on a SAN is key to making SANs more widespread and ubiquitous.

We've enlisted Brocade and McData, Qlogic, and Cisco to support Radius, Active Directory, and LDAP in Windows Server. It's Radius that will work with the SAN.

[Ed. note: Microsoft is working with

QLogic Corp. (Nasdaq: QLGC), as well as Brocade Communications Systems Inc. (Nasdaq: BRCD), Cisco Systems Inc. (Nasdaq: CSCO), and McData Corp. (Nasdaq: MCDTA), among others, to tie SAN interfaces into the Remote Authentication Dial-In User Service (RADIUS) security – now used in Windows Server 2003 – into Windows Storage Server 2003. The goal is to link the SAN gear's operating system with Microsoft's server directory and Radius capabilities, which in turn are tied in with the server's directory.]Byte and Switch: How does SAN compare with NAS in your strategy?

Stevens: A great advantage of NAS is that it's like plugging another server into the network. SAN is harder to configure and costlier to deploy. We will push NAS up as far as it will go. I think one won't win; it'll be a combination of both, like HP has a combination of NAS and SAN – SAN in a box with Windows NAS.

We see NAS growing in the low end $400 to $5,000 space, with help from low-cost disks and good software for home offices and SMB. NAS is also very strong in the midrange, in the departmental or branch division, mostly around file server consolidation. The high end is the overlap with SAN, and it's not a case of one size fits all. SANs are great if you can afford them and have the expertise to deploy them.

NEXT: Odds and Ends

Byte and Switch: You once managed Microsoft's Asian sales. Can you speak to the geographic situation in network storage?Stevens: The trends we've talked about are pretty uniform globally, but each market is at a different stage. There's quite a bit of variation, not so much in servers but in storage.

The NAS business is much smaller in Asia than elsewhere, for instance, but Asia will have the fastest growth in storage. Japan is like the U.S., with lots of SAN. China, Southeast Asia, Korea – that's a new market. There are developers there and in Taiwan looking to build low-cost servers and storage devices. Companies like Samsung are innovating around low-cost storage and cheaper disks for mass market use.

All parts of Europe and Russia present massive opportunities for storage.

Byte and Switch: What about India? We hear a lot of storage companies investing in storage technology centers there. [See Intransa Goes to India With SES, EMC to Invest $100M in India, NetApp to Open Facility in India, and Microsoft Adds India Storage Team

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